Current Affairs – Latest Trends in India Japan Economic Relations

First Published: December 22, 2009 | Last Updated:November 22, 2013

As per a latest survey by Japan Bank for International Cooperation (JICA) Japanese manufacturing companies wish to do business with China (74% respondents ) and India (58% respondents) thus keeping India is ahead of all other Asian countries. Let’s have a look on latest trends in Economic relations between India and Japan:Background:

“Japan-India Global Partnership in the 21st Century” was issued in August 2000 when Japanese Prime Minister Mori visited India. Indian Prime Minister Vajpayee visited Japan in December, 2001, where both Prime Ministers issued “Japan-India Joint Declaration”, consisting of high-level dialogue, economic cooperation, and military and anti-terrorism cooperation.

In April, 2005, Japanese Prime Minister Koizumi visited India and signed Joint Statement “Japan-India Partnership in the New Asian Era: Strategic Orientation of Japan-India Global Partnership” with Indian Prime Minister Manmohan Singh.

“Strategic and Global Partnership” between the two countries were established in December 2006.

Annual summits and a structure of multiple channels of dialogue were to be the change drivers in this inchoate partnership. These summits were held in 2007 and 2008 in New Delhi and Tokyo and they gave an auspicious beginning to process.

Recent Past and a Look at Future:

Government in Japan has changed in 2009 , however it seems to make minimal effect on India Japan relations.

The Global Eco-Business Forum was held in New Delhi, India on September 5, 2009, supported by JBIC (Japan Bank for International Cooperation) and other institutions.

The next India-Japan summit will be held in India in 2010 in which the then Prime Minister, Mr Yukio Hatoyama, is due to attend in India and it will give some more clear perspective in the Indo Japan relations.

India Japan Flagship projects:

Most significant Japanese involvement with the Indian economy is in terms of the implementation of the flagship infrastructure projects of the Delhi-Mumbai Industrial Corridor (DMIC) and the Dedicated Freight Corridor (DFC) linking the two poles of the country’s development.

The above projects are Modeled on the famed Tokyo-Kyoto Osaka Corridor in its aim of developing the entire region along the 1,483-km transportation link, the DMIC project plans to cover 20 per cent of the Indian population in a time-frame of 11 years.

Official Development Assistance (ODA) Loans from JICA:These Japanese ODA loans are being provided for four projects. One is a project to improve urban traffic in the National Capital Territory of Delhi and the other three involve construction and renovation of the waterworks in regional cities, including work in the impoverished northeastern state of Assam.Following are the projects:

Delhi Mass Rapid Transport System Project:

The aim of this project is renovation and improvement of the urban traffic system and environment in Delhi

Japan International Cooperation Agency (JICA), a government arm, had provided a ¥137-billion (Rs 7,000 crore — Rs 70 billion) loan for 2008 to set up drinking water facilities in Hogenakkal, Kerala and Guwahati, besides constructing the Delhi Metro.

The objective of this assistance was to address the growing demand for water by renovating waterworks facilities and improving the organizational capacity of the agencies in charge of the waterworks.

Hogenakkal Integrated Drinking Water Project which is also a fluorosis mitigation project being undertaken at Hogenakkal, Dharmapuri district, state of Tamil Nadu, India.

HIV/AIDS awareness education and prevention activities

Dedicated Freight Corridor Project (DFCP):

Japan Bank for International Cooperation will fund close to Rs 20,000 crore (Rs 200 billion) in developing Delhi-Mumbai Industrial Corridor and the Dedicated Freight Corridor.

Freight rail lines will be constructed along the Western Corridor between Delhi and Mumbai and the Eastern Corridor between Ludhiana, Delhi and Sonnagar.

The Japanese ODA loan project (the Project) will focus on constructing approximately 920 kilometers track of the Western Corridor between Vadodara and Rewari, connecting major cities in the states of Gujarat, Rajasthan and Haryana, as well as introducing electric locomotives capable of high-speed, high-capacity transportation.

By meeting the high rate of growth expected in freight transportation and optimizing distribution networks, the Project will make a far-reaching contribution towards India’s economic development.

The loan will be allocated to engineering services to prepare and draw up designs of the Project and prepare bid documents.

Buddhist Circuit in Bihar:

In August 2009, Japan Bank for International Cooperation (JBIC) agreed to fund Rs.16 billion for the construction of 481.20 km of four-lane roads for Bihar’s Buddhist tourism circuit.

Under the project, the existing 275 km stretch of the Bakhtiarpur-Biharsharif-Nalanda-Rajgir-Hisua-Gaya-Bodh Gaya route will be fully upgraded.

The roads connecting Buddhist holy shrines are in poor condition, discouraging foreign tourists from travelling to the region.

Foreign Direct Investments:

At present Japan ranks sixth in the cumulative FDIs in India.

Mauritius which ranks first, accounts for 44 per cent of cumulative FDI in India.

Next are United States, United Kingdom, Netherlands, and Singapore.

The Japanese Interest is mostly in sectors such as automobiles, IT, infrastructure, steel, power and pharmaceuticals.

In 2009 FDI inflow from Japan has touched Rs 3,857 crore which is the highest ever in a year. In 2008-09 it had dipped due to Global Financial Crisis.

Cumulative investments by Japanese companies in India are to the tune of over Rs 15,000 crore (Rs 150 billion), about 3 per cent of the overall FDI in India, according to data from the Department of Industrial Policy and Promotion.

Technology Transfer:

In terms of foreign technology transfers approved by India, Japan ranks third after US and Germany. JBIC has played a vital role in this field.

Pharmaceuticals:

Daiichi Sankyo is Japan’s Third largest Pharma Company (Takeda Pharmaceuticals & Astellas Pharma are two largest in Japan) had acquired the largest Indian drug maker, Ranbaxy Laboratories for Rs 19,803 crore.

Infrastructure:

Japan Bank for International Cooperation (JBIC) had extended a Rs 715-crore (Rs 7.15 billion) loan for L&T-MHI; Boilers (LTMB) and L&T-MHI; Turbine Generators, two joint venture companies being set up by India’s engineering major Larsen & Toubro (L&T;) and Japan’s Mitsubishi Heavy Industries (MHI), to make boilers and turbines for thermal power plants at Hazira in Gujarat.

Information & Technology:

Japan is the second largest IT spender in the world at over $108 billion annually, next to the US.

Many of the India’s leading IT players have significant presence in Japan and majors such as IBM, Accenture, Wipro , Infosys , TCS and Patni have already set up establishments there to outsource work to India.

Steel:

JFE Steel Corporation will invest in Sajjan Jindal-promoted JSW Steel to pick up a minority stake, besides jointly making auto grade steel and setting up a mega integrated steel production facility in West Bengal. It is second largest Steel producer of world.

Automobiles:

Indian roads have been flooded with Maruti Suzukis as investments have flooded in India from Japan. Japanese made small cars like Nissan’s Micra will debut on Indian roads very soon.The company is setting up a plant in Bangalore.

Toyota Motors also wishes to make India a hub for making its small cars. Toyota will invest over Rs 2,500 crore (Rs 25 billion) by 2011 to set up a second plant in Bangalore to increase its capacity by four times. Honda Motors is also in the queue to launch a small car in India by 2011.

Yamuna Action Plan:

Yamuna Action Plan (YAP), a bilateral project between the Government of India and Japan, now in its second phase, is one of the largest river restoration projects in India.

The government of Japan via the Japanese Bank for International Cooperation (JBIC) has provided financial aid of Yen 13.33 billion to carry out the project which is being executed by the National River Conservation Directorate (NRCD), Ministry of Environment and Forests(MOEF), Government of India.

Hydropower:

India has the estimated potential to generate 145,000 MW electricity from water resources, but it has utilised only 22 percent.

The Japan Bank for International Cooperation (JBIC) will play a bigger role in the development of India’s hydropower sector.

The government of India is identifying projects for possible financial assistance.

Key hydropower generators, including state-owned companies like National Hydroelectric Corp (NHPC) and Tehri Hydro Development Corp (THDC), have lined up proposals for consideration for JBIC funding.

Some of the projects are Dibang and Tawang in Arunachal Pradesh, Teesta in Sikkim part from Jhelam Tamak and Malari jhelum Projects.